Major department store Myer has reported a 19.8 per cent drop in first-half profit to $87.3 million, following sliding sales.
The results, for the 26 weeks ended January 28 2012, revealed a sales decline of 1.7 per cent to $1.7 billion and a 3.0 per cent decrease on a comparable store sales basis.
Sales for the second quarter alone were also down, 0.4 per cent to $1 million, while comparable store sales decreased by 1.7 per cent – an improvement on the first quarter results.
Despite the lacklustre figures, Myer reported that Miss Shop, its youth apparel category, womenswear, childrenswear and cosmetics were the best performing categories for the half year.
Womenswear brands Lipsy, Wayne by Wayne Cooper, Leona by Leona Edmiston, Regatta, Bonds, Jane Lamerton, Basque, Miss Shop, Tokito, Blaq and Jack Stone were also identified as the best performing brands for the same period.
Recent Myer acquisitions, Jayson Brundson and Sass & Bide, have also performed well, with Sass & Bide in particular garnering “excellent customer response with highly profitable sales approaching $25 million in the first half”.
The company also revealed that a Sass & Bide lingerie range is to be introduced from fiscal year 2013 and Myer will “also seek to acquire brands where it makes commercial sense and where the addition of the brand will strengthen the merchandise offer”.
Myer CEO Bernie Brookes said that while the business made “good progress on delivering it's strategic plan in the first half”, results were impacted by significant additional costs in the 2012 financial year.
Cost impacts during the half identified included the decision to invest in additional hours in customer facing wages, an increase in depreciation from $35 million to $40 million as a result of the completion of major capital projects, and ongoing operational costs such as store wages, penalty rates and loadings resulting from award modernisation of the General Retail Award. Store occupancy rates, such as rents, rates and taxes were also mentioned as ongoing operational costs.
In the wake of these results, Brookes also confirmed that the company will not proceed with the planned new store at Watergardens in Victoria.
“We have recently taken the decision not to proceed with a planned new store at Watergardens, as significant delays in this development led to Myer exercising its right to exit the agreement,” he said.
However, Brookes said the launch of two new stores, at Fountain Gate in Victoria and Townsville in Queensland, is still on track for 2012, along with another store currently undergoing construction at Shell Harbour in New South Wales.
“We will continue to review the merits of all new and existing stores, particularly in the context of lease renewal discussions,” Brookes said.
Looking ahead, Brookes said the company will focus mainly on further improving its customer service, including its Myer One loyalty program, and boosting its online and omni-channel initiatives.
“A number of key initiatives are underway to further strengthen the loyalty program and importantly, to support our omni-channel strategy. The program is being refreshed under a number of different work streams, including the development of an enhanced Myer One smart phone application,” he said.
“Our online sales are [also] growing rapidly and we recognise there remains a significant opportunity to capitalise on the strength of the Myer brand. Given the significant capital investment already made in supply chain and technology, we are well placed to expand our fulfilment capability as online sales grow.”
Assuming no further deterioration of trading conditions, the company also reconfirmed that net profit after tax guidance for the 2012 year is expected to be “no worse than 10 per cent below the 2011 fiscal year ($162.7 million)”. This will also include the impact of one-off additional costs of $40 million.